News Archive Article

Sinovel to raise $1.4 billion in Shanghai IPOs

SHANGHAI, CHINA - Sinovel, China's top wind turbine producer, plans to raise up to $1.4 billion in one of the most expensive main board IPOs in Shanghai, hoping to ride high on the back of strong demand for Chinese renewable energy stocks.

Sinovel Wind Group Co, which unveiled the indicative price range for its IPO recently, looks poised to become China's first major IPO of the year and follows a bumper 2010 for IPOs in Asia.

Still, the Sinovel listing may well be a test for China's IPO market, which had a mixed performance late last year with some firms such as China's No. 3 wind company Huaneng Renewables Corp scrapping plans to list in Hong Kong due to market volatility.

Sinovel will sell up to 105.1 million shares at 80-90 yuan apiece, according to an exchange filing, potentially enabling the firm to raise as much as 9.46 billion yuan US $1.4 billion, nearly three times its original target of 3.45 billion yuan.

That would make Sinovel the most expensive IPO ever in per-share terms on the main board of the Shanghai Stock Exchange.

Sinovel's IPO range represents 43.41-48.83 times the company's 2009 earnings, compared with an average of around 30 times for Shanghai IPOs last year.

"The company has been growing very rapidly in the past few years, so if you look at expected profit for 2011, the valuation is not really high," said Qi Qi, an analyst at Shenyin Wanguo Securities Co in Shanghai.

"But the industry's growth has already been slowing due to increasing competition, and Sinovel's growth will also be restricted by the fact that it's already the market leader, so I don't expect to see a very feverish debut."

Qi expects Sinovel's profit to grow about 30 percent this year, which means the IPO range values the company at around 20 times P/E ratio.

A strong performance for Sinovel's IPO would set a good tone for Chinese fundraising in 2011, after the country's IPO market hit a record 478 billion yuan US $72 billion in proceeds in Shanghai and Shenzhen last year, up 155 percent from 2009, according to corporate advisory firm PwC.

The total number of new listings will reach 320 in Shanghai and Shenzhen this year, with funds raised expected to exceed 400 billion yuan, PwC said at a briefing in Shanghai.

Sinovel told retail investors in an online roadshow that it would use the proceeds of its IPO to expand wind power installed capacity and beef up its research and development capability for 6-megawatt MW turbines.

The company expects its business to grow at a more than 30 percent compound annual rate over the next five years, it said.

Investors are concerned about falling wind turbine prices but Sinovel expects product prices and profit margins to stabilize over the next few years because production costs have also dropped.

"Moving forward, prices of wind turbines should hover around 3,800 yuan per kilowatt an annual fall of 1,000 yuan per kilowatt won't happen again," said Chairman and President Han Junliang, referring to sharp falls in turbine prices in the past few years.

Under Han's leadership, Sinovel displaced Xinjiang Goldwind Science and Technology as the top Chinese wind turbine company in terms of installed capacity via a series of aggressive expansions in the past two years.

Han, an engineer by training who is known for keeping a rather low profile in the fiercely competitive market, signaled his dedication to his work by telling the online roadshow that his hobby was "building China's wind turbine industry into the top player in the world."

China has been doubling installed wind power capacity every year for the past several years as it pushes ahead to develop the sector, with some of the $1.5 trillion investments over the next five years earmarked for the green sector.

In 2009, China became the third largest wind energy provider worldwide, ranking behind the United States and Germany.

Despite increasing competition, Sinovel still cannot meet rising customer demand and consolidation in the sector would benefit the industry, it said in its IPO prospectus.

Sinovel competes with major domestic rivals Xinjiang Goldwind and Dongfang Electric Corp as well as global competitors including Vestas Wind, Siemens and General Electric Co.

Related News

Britons could save on soaring bills as ministers plan to end link between gas and electricity prices

LONDON - Britons could be handed relief on rocketing household bills under Government plans to sever the link between the prices of gas and electricity, it has emerged.

Ministers are set to bring forward new laws under the Energy Security Bill to overhaul the UK's energy market in the face of the current cost-of-living crisis.

They have promised to provide greater protection for Britons against global fluctuations in energy prices.

The current worldwide crisis has been exacerbated by the Ukraine war, which has sent gas prices spiralling higher.

Under the current make-up of Britain's energy market, soaring gas prices have had a knock-on effect…

READ MORE
Sara Hastings-Simon

Could selling renewable energy be Alberta's next big thing?

READ MORE

bc electricity demand graph

BC Hydro: 2021 was a record-breaking year for electricity demand

READ MORE

Pickering nuclear station is closing as planned, despite calls for refurbishment

READ MORE

hong kong harbour

Hong Kong to expect electricity bills to rise 1 or 2 per cent

READ MORE